US activist hedge fund managers are targeting the world’s largest listed companies, such as Procter & Gamble (P&G), which has a market capitalisation in excess of $200 billion. Schulte Roth & Zabel’s (SRZ) leading shareholder activism lawyers are advising those managers, including Trian Partners, Elliott Management, Greenlight Capital and JANA Partners. Among numerous campaigns in the past year, SRZ advised Trian Partners in its campaign at P&G, the largest company to ever be the subject of a proxy contest.
‘We expect activists will continue going after large caps and mega caps’, says SRZ partner Marc Weingarten, co-chair of the firm’s global Shareholder Activism Group. ‘Their fund sizes are now so large that in order to move the needle, they have to go after large- or mega-cap stocks. They cannot invest enough in small- and mid-cap stocks. Indeed, Elliott runs $34 billion, Trian Partners $13 billion, Pershing Square $12 billion, and JANA Partners $7 billion.
The size constraint is heightened by activists’ tendency to run concentrated, high-conviction portfolios with hefty positions. For instance, Trian had around $3.5 billion, or near 25 percent of its assets, invested in P&G. It became the company’s sixth largest shareholder with a 1.5-percent stake. The return to activists targeting large-caps was among the many current trends discussed at SRZ’s 8th Annual Shareholder Activism Conference in October 2017. The event was held in New York.
If some campaigns have not (yet) obtained their stated objectives, some proxy votes have been so unbelievably close that Weingarten expects ‘both activists, and companies, will be emboldened to fight harder’. For instance, in the P&G case, Nelson Peltz won 973 million votes, or 48.6 percent, against the 979 million, or 48.9 percent, won by the other candidate. Clearly, this could have easily gone the other way.